Participants in drug rehab program not owed pay for work, court says

Aug 25 (Reuters) - A U.S. appeals court on Thursday said participants in a court-ordered drug and alcohol rehabilitation program in Arkansas were not owed the minimum wage for performing work for local businesses and tossed out a $1.5 million award in their class action lawsuit.

A unanimous three-judge panel of the 8th U.S. Circuit Court of Appeals said people who took part in the residential program to avoid jail time were not the employees of DARP Inc, which operated the program, or Hendren Plastics Inc, where they worked for up to one year.

Hendren paid the participants' wages of $9 per hour directly to DARP, which used the money to operate the program. The 8th Circuit said the participants derived more of a benefit from the program than DARP or Hendren, and so were not employees under federal and Arkansas wage laws.

The ruling reversed an Arkansas federal judge who ruled in 2019 that the plaintiffs were DARP's employees because they received compensation in the form of housing, food and transportation, and that Hendren was their "joint employer" because it controlled their work at a plastics factory.

The judge had awarded the class, which includes about 180 people, more than $1.5 million in damages and legal fees.

Lawyers at Cross, Gunter, Witherspoon & Galchus who represent DARP and Hendren did not immediately respond to a request for comment. Nor did lawyers for the plaintiffs.

The lawsuit was filed in 2017 by named plaintiff Mark Fochtman, who said DARP and Hendren violated state law by not paying participants in the rehab program at least the minimum wage.

U.S. District Judge Timothy Brooks in Fayetteville, Arkansas granted summary judgment to the class in 2019. The judge said DARP and Hendren had "manipulated the labor market and skirted compliance with the labor laws for their own private ends."

But the 8th Circuit on Thursday said the participants, and not DARP or Hendren, were the "primary beneficiaries" of the program, which meant the were not employees under state or federal law.

Even assuming that Hendren gained a competitive advantage by paying a lower cost for workers with drug problems, the company paid DARP well above the state minimum wage, which at the time was $6.25 per hour, Circuit Judge Steven Colloton wrote.

The panel included Circuit Judges James Loken and Duane Benton.

The case is Fochtman v. Hendren Plastics Inc, 8th U.S. Circuit Court of Appeals, No. 20-2061.

For the plaintiffs: John Holleman and Timothy Steadman of Holleman & Associates

For DARP and Hendren: Abtin Mehdizadegan of Cross, Gunter, Witherspoon & Galchus

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